TFTC: A Bitcoin Podcast - Bitcoin Alpha E004: How AnchorWatch is Redefining Bitcoin Risk Management

Episode Date: November 29, 2024

The Ten31 team sits down with Rob Hamilton and Becca Rubenfield from AnchorWatch to discuss becoming a Lloyd's of London Coverholder. 0:00 - Disclaimer 0:24 - What Anchorwatch offers 5:26 - Leveraging bitcoin and Miniscript 12:52 - What makes Anchorwatch different 19:43 - More on what Miniscript offers 29:39 -Smart contracts 36:56 - Early Anchorwatch 42:38 - Good UX without compromise 47:31 - Possibilities and future plans 59:59 - Risk appetite at Lloyd’s 1:13:01 - How bitcoin helps the insurance industry 1:22:45 - Wrap up

The following is for informational and entertainment purposes only and should not be construed as financial advice. This discussion is a presentation by 1031, the leading institutional investor focused on the Bitcoin ecosystem. 1031 has over 10 years of experience in Bitcoin and has deployed nearly $150 million into the leading opportunities in the space. To learn more, visit 1031.vc. Grant is in the arena. Yeah, this is a big day for us on Bitcoin Alpha Podcast. We have our first guest, and we're missing one of our co-hosts, Grant. He's in the arena.

I'd like to introduce you all to the co-founders of Anchor Watch, Becca Rubenfeld and Rob Hamilton. Welcome to the show, guys. Thanks, Marty. Hey. Thanks for having us. Hey, John. Hey, guys. two of the two of the absolute uh highest leverage players in all of bitcoin so uh very uh pound for

pound definitely some of the best founders out there so happy to have you guys on we lift we're we're a team who lives together yes yes that's right that's the secret to it all is the death that's right universal deadlifting requirement for the team deadlifts you have feats of strength and then feats of endurance, too. I think the road that led to the big announcement for you guys last week was a feat of endurance getting through to the point where you're an official Lloyds of London cover holder and just watching from behind the scenes for a couple of years now

as you guys have been building out not only the tech stack but the business operations and the infrastructure necessary to offer the product that anchor watch does has been a feat of endurance is is how i would describe it and you guys have crushed it and as we were saying before we hit record we're very excited that you guys are at this point particularly as bitcoin is gearing up to approach maybe pass a hundred thousand dollars um so it felt like really good timing to get you on the show not only that be the first guest that we have here on bitcoin alpha are we the first guests you're the first guest do you not listen to the bitcoin alpha podcast this is did you miss

last week that that feat of endurance uh required some fingers on keyboard time for me so i may have missed missed last week's but this is exciting yeah yeah i feel like i should just take a step back because marty i've been on your podcast several times and i can just kind of hang out and you can get to know Becca more uh the larger you know audience of uh podcast consumers it's to your point about Lloyd's of London the cover holder status I think there's a whole discussion around that but it's been um years in the making Becca and I started Anchor Watch in you know as a concept like in February of 2022 and very quickly um we're leaning in to do the hard challenging things like insurance it's not something you really can just like spin up out

of your basement and do like a lean startup in the sense that you have to have, you know, insurance is a very heavily regulated and, you know, compliance focused industry. And we, from the inception of the company, to be able to offer insurance on Bitcoin, wanted to go to the best capital providers available in the world, right? And there is no better standard when it comes to insurance than Lloyd's of London. And so to be able to announce that we're underwritten by syndicates at Lloyd's of London is just a massive milestone for us and kind of our commitment to doing things the slow way and the right way and a real testament to Becca and a lot of the work that she's been architecting behind the scenes quietly for years now. So I'll hand it

over to Becca and she can kind of dive in a little bit more there. But we're really excited to be at this point, especially as the market's starting to heat up and putting in that long, hard proof of work and being able to have results on the other side of it. I appreciate it. Yeah, it was a long road for sure. And in addition to just kind of being the best, it's also a response to what prospective customers were telling us along the way as well. They were specifically looking for that Lloyd's name when they were asking who underwrites us. You guys are a startup. Who are you underwritten by? Is it Lloyd's? I want it to be Lloyd's. And so it became really clear to us, especially as we set our sights on large policies, on being able to cover both individuals and

commercial customers for millions and millions of dollars, that that was the path that we really needed to go to provide a high quality product on the market. One thing that we heard along the way, both from investors as well from as customers who maybe had sought out insurance previously, is the few policies that they were able to find out there. And this is both across traditional insurance. It also included things, you know, crypto type products that were insurance protocols, things like that, that ultimately when they were able to take a look at the details, they were not satisfied with what they were able to find.

They were looking for high quality insurance. And so that's really that's really where where we set our sights on. Yeah, well, let's zoom out a little bit high level, because I think what enables you guys to offer the type of insurance that you do on Bitcoin requires leveraging some of the technical capabilities of Bitcoin, particularly some of the cutting edge technical capabilities around Miniscript and smart contracting. And so being compliant with Lloyd's, I think part of that compliance is the technical side. And so I think let's just dive into high level, excuse me, a high level of what Anchor Watch offers and how it melds the technology of Bitcoin's native properties with traditional insurance contracts. I'd love for Rob to kind of tackle that in terms of the specifics. But I think it's interesting even to kind of set the stage for that, as well as what building our tech product is going to enable for us to go forward. So when we were really selling ourselves and selling this concept to Lloyd's, what we really wanted to be able to offer was one-to-one insurance to customers with their name on the contract.

So out there, there might be omnibus policies, policies that are shared across a huge customer base that end up being fractions of a penny of coverage on dollar in custody. And so ultimately, we felt that was, you know, from our point of view as Bitcoiners, it was a little bit illusory that, you know, we really wanted to be able to offer something that gives people a lot of peace of mind and actually will take really good care of them if some sort of disaster happens. And building Trident really was the unlock to be able to do that, specifically to get this one-to-one coverage and up to $100 million of custody. It is on the back of the tech and how we have built our first product. I do think, though, before I hand it off to Rob to go deep, the other thing that this whole process has done, though, is to build trust in Anchor Watch.

So I think go forward, you know, right now we have a specific product, but what they have is this immense trust in Rob and his ability to assess custody technology across the board, and it really just made them feel very comfortable that we are able to align our understanding of risks with different technologies that are out there, which for anchor watch, it enables us to continue to build out our offerings go forward. Yeah, I think that sets it up really well. And to kind of talk about our vision of why we wanted to do it the way we did with your name on a policy with your Bitcoin UTXO set with an output descriptor, like your addresses are directly tied to you and having an insurance contract

anchored to that helps for distribution of risk for like why this has been a hard thing to tackle up until now is that if all the keys are sitting at one company the all of the risk is concentrated at one company right which is concentration of risk is kind of like going all in on a single bet if like you you don't want to do that it's a very highly volatile thing which is something that yeah you would want to be risk adverse and avoid right you don't want to have one incident at a company cause a cascading loss of everything and this goes into the actual technology itself with Miniscript. The ultimate concept here is that we are leveraging Bitcoin native smart contracts and anchoring them to traditional finance contracts. With the first concept of your

specific Bitcoin, your specific insurance policy, and using the technology of Miniscript to enable things like time locks, which by themselves are just really compelling because it makes sense for large sums of money, you would want to have time as a security element, right? Additionally, the use of time locks allows you to have a Bitcoin address that has multiple ways you can spend from it over time. And you can start seeing how we can enable risk distribution by saying, for the length of your contract with us insuring your Bitcoin, we at AnchorWatch have to sign as well as you as the customer.

This is not a two of two under the hood on chain. It's actually the customer has a two of three and AnchorWatch has a two of three. And for the length of the insurance contract, both parties need to sign off on it for the first, let's call it 11 months. Six months in, you're the customer. You accidentally either have an incident or through some sort of circumstance lost access to two of your keys. Six months in, after the inception of your policy on-chain, we're able to say, you know what, it's just a one of three. You know, one from you as the customer and then still the two, three from Anchor Watch. And let's say in a really extreme example, let's say someone stole or lost or physical damage from natural disasters or what have you, and all of the keys that were said belonging to you as the customer were gone, there's actually a window before the end of the policy where AnchorWatch plus a third party are able to come in and able to help recover the funds back to you.

And then at the end of your policy, if you don't want to work with us anymore, the default state, if we cease to exist, actually at the end, it goes back to you as the customer as a two of three, you as a sovereign exit, because we no longer hold a contractual liability because it's after the insurance contract ends. And what you can notice is that at every stage of while the contract is active, there isn't one unilateral person who's controlling all of the funds. And the introduction of time allows this risk mitigation where you can start instead of when you're setting up a traditional legacy multisig today, a two of three, a three of five, your threat model is how do I make sure I keep the two of three or the three of the five safe? And you

kind of trade off from there. By leveraging time, though, you can see we can actually start changing who are the other countersigning parties, which allows you to mitigate risk and distribute risk outside of just a single entity. And that's just a really powerful way to do this risk distribution in such a way that we're able to write these higher limits and being able to also just offer this to individual customers directly. Just before throwing it off here, Becca has this really compelling point of insurance shouldn't just be marketing. Like insurance is actually a financial guarantee in a contract, right? And what we've seen largely in this industry is that you almost see like rehypothecation of insurance. Everyone has the same insurance policy and everyone's like

looking at, it's the same policy though. And just like if you had 10 buildings and you had one insurance policy covering all 10 buildings, that doesn't mean that if a fire happens at five of then that one policy is going to pay out five different times, right? You need to have your property tied to your name on an insurance contract. And we really feel this is the first inception. And this is kind of the first major step for us unlocking this. It's mine and Becca's very strong felt conviction that probably a couple of years ago was very contrarian, is that as Bitcoin continues to financialize and enter traditional financial

markets, insurance is going to be table stakes for large enterprise custody. Because if you've already made the emotional risk of I'm going to accept the price volatility of Bitcoin. The last thing you need to have is be directionally right, but then be in an FTX or Celsius or a Quadriga or a thousand other ones where you made the right directional bet, but you still lost. And the way traditional custody models work today is they get to pick up a SaaS fee, like pennies in front of a seam roller, something bad happens, you may be shortchanged or not have any coverage at all. And that's a very poor bet for you as the customer where you're holding all of the risk ultimately. And that's not just a way that we think Bitcoin as a maturing

asset should work. Well, I really want to lean in on that point specifically, Rob, because I think it may not be totally clear to people who are kind of looking at the industry from a 10,000-foot view, looking at custodians that are out there and different kind of, quote-unquote, insured policies and custody accounts that are out there, why you guys and what you're doing is so differentiated from kind of the mass of what exists today. I think there may be a danger that people see, you know, insured custody at X, Y, Z custodian, X, Y, Z exchange. And they think, oh, well, that that's one for one. You know, if if something terrible were to happen, if some catastrophe were to occur, my funds are basically backstopped and safe by made safe by

some sort of insurance policy that covers me in the way that I would think about, you know, homeowner's insurance or some traditional kind of asset insurance where I'm covered for, say, replacement cost of the asset. But I think what you guys noticed early on several years ago and kind of helped animate the creation of anchor watch was that that's very much not the case with kind of traditional crypto insurance broadly uh rob you mentioned this concept of kind of fractions of you know pennies on the dollar for um you know coverage of assets that existed a lot of custodians and exchanges and really just want to drill into that and you know help people you know uh frame up the market that currently existed you know prior to anchor watch coming onto the

scene and you know why the degree to which it's you know so insufficient and so far from what what people traditionally think of when they think of, you know, an insurance policy on something. I'll throw it over to Becca. Yeah. So, I mean, now that we are a cover holder of Lloyd's of London and, you know, we are ready to serve customers, I think we're much more in a position to help educate customers as to the reality of the marketplace. I think we were watching some of the messaging going on previously and really just, you know, waiting until our moment had arrived, until it was appropriate for us to really highlight the differences out there.

So in terms of what has been out there, first, I'll point out, as far as we're aware, certainly in the United States, there are no options for retail customers to get any sort of custody insurance whatsoever before Anchor Watch. So our policies are the first time that customers have access to that. You know, if we pull way back, you know, Rob, others will kind of talk about insurance's role. You know, they'll bring in Austrian economics. Like I'm a business person. I just think of it just straightforward. This is a bearer asset, right? This is a bearer asset. If you lose it, it's gone forever. Nothing makes more sense than having insurance on something that's effectively irreplaceable, right? So having a fraction of a penny of coverage on

something that's irreplaceable is not particularly helpful, right? Like if I'm trying to preserve my nest egg, the future of my family, the treasury of my company, insurance should not be marketing. Insurance should actually be there to provide a financial backstop. So, you know, there was nothing in place for retail customers. For commercial customers, again, if they wanted to hold any keys, again, nothing available. So again, we're first to the market allowing customers to hold keys to their own Bitcoin and insure specific UTXOs. These are your Bitcoin and they are insured. The existing policies that we're aware of at Custodians and get advertised as fully insured, and we strongly push back on that framing, are a omnibus policy, meaning the policy

is shared by all customers and they have a per limit cap. And there's nothing wrong with that, First of all, like as long as everything is presented accurately and customers understand the level of coverage that they have, there's nothing wrong with with different levels of insurance. So I don't want to say that only one to one is the only solution, but you certainly should should be accurate in terms of what's covered. So if you are a commercial customer and you put your Bitcoin at a custodian and they have a policy for 100 million, 200 million, 300 million, and it's shared across all their customers, you need to be asking, OK, how much do you have in custody and comparing those two numbers? Is it, you know, pennies on the dollar? Is it fractions of a penny on a dollar? If a loss occurs, what are what are the reasons for loss? Is it only inside bad actors? Is it physical events? All the normal things that you should

ask. And customers should ask us those same questions as well. Like you want to be very clear in terms of what it covers, what it excludes. And you want to know if one of those covered losses happens, is the company obligated to pay you out? Is the insurance payment going to customers no matter what, even if it is shared across all customers? Or could it be used for a company's legal expenses or other things like that? So these are all questions that as a customer of a custodian, you want to ask your custodian, right? They're the ones who purchased the policy, they are the named insured on the policy, and they're the ones that can provide those answers. So even if we get away from any specifics at any given custodian or any specific policy,

it became very, very clear that there was nothing on the marketplace that was designed to help you make sure that you are taken care of fully in the case of something very, very wrong. So we set out as Bitcoiners. That was our lens throughout this process. Right. We're heavily invested individually. Obviously, our company is built on Bitcoin. We have a Bitcoin treasury and we set out to build a product that covered as much of the real risks that cause you to have a catastrophic loss of this bearer asset as possible and bring it to market at a cost that's market clearing. Meaning customers can weigh these risks and say, look, I think losses could happen for these covered reasons. And if that were to happen, I don't want my company to go bankrupt.

I don't want my family's nest egg to be wiped out. And I'm willing to pay some of my capital, you know, in order to have that guarantee. I mean, diving into Lloyd's cover holder and the process to get that really digging into the smart contracting capabilities and the comfort ability that that gives Lloyd's in terms of allowing you to to issue these policies. And Rob, I know you described it, but let's dive a little deeper into the specifics of that. Like, what is it about Miniscript that makes you and Lloyd's comfortable to underwrite these policies? so um it's there's a couple of pieces here is first um the it was uh you know becca and i a little over a year ago went to london and had a conversation with you know syndicates there directly and you would think as like the uh or you'd maybe imagine myself as like the tech forward

very deep in the details bitcoin guy that like i'm gonna take because i over the past two and half years, Beck and I have had to do a lot of picking how deep and complex you need to go. These stakeholders go right to the deepest. We did not have to explain to them public-private key stuff. They were very familiar with the trade-offs between Bitcoin native script versus MPC, which is a very common thing that we talk about very much in our circle. But you start realizing that if they're the ones underwriting these large policies that exist out in the market today, they want to know the details of what they're doing, right? And it makes sense that it took a couple conversations just to walk through and explain it, but conceptually being

able to walk back and say, this code has been around for some time that actually enables these Bitcoin native smart contracts. We have had developers not only audit our tech stack on the application side, but on the Bitcoin side of the application logic, as well as having devs look through the actual way that we're constructing and employing this. We've had multiple sets of eyes on this and being able to also look and say that, you know, Miniscript is something that came from the most senior respected developers in Bitcoin. And it's been around for a very long time between Andrew Polstra, Peter Will and Sanket. You know, these are the leading cryptographers and maybe they won't view themselves as cryptographers. They're the leading Bitcoin

developers that go deep into those technical details and architected the previous softworks. to happen, right? These are the people when we actually do decide to make changes to Bitcoin, we put a lot of faith in their ability to sanely design complex systems to be able to have things operate correctly. And it's something that, you know, when I first, you know, over a year ago, started going through all of this, I had to kind of go through my own upscale and learning. And ultimately, Bitcoin script is intentionally very narrow, right? Like it doesn't let you do a lot of things and so when you actually as some on-chain sleuths can click like click around and find like our contracts are live on mainnet and they have been for over six seven months now we've

been running different like versions of it it's very simple logic when you look at it and just say okay the anchor watch two of three commits does it sign okay then go to this next range oh did anchor watch not sign it goes all the way to the end you can say okay this time lock has to be satisfied, right? You can just like very simply, it sounds complicated. And this is kind of part of, I would say, a bit of the most difficult part of all this is actually wrapping around the application to make it really digestible and make people feel comfortable with this. But to your point, though, there was conversations and kind of explaining kind of the very risk adverse approach we were taking into going about it the best way. It really helps to

have developer systems, not just of Miniscript, but also Bitcoin Developer Kit, BDK for short, that we build our stack on top of, which allows us to focus specifically on the application layer use case and all of the intense operations like constructing PSPTs and generating addresses and making all of this stuff gets handled by the experts in the industry

that have been working on these pieces of software for so long. And I would say that for us, that actually was the larger challenge. It's not, can I, with my command line, technically get all this stuff to sanely, safely execute. It was, how do we wrap this in a user consumer-facing experience that made people have faith, trust, and confidence that they had knowledge and consent for how their money was being managed? And that was definitely a large

piece of what Becca brought in as a unique perspective, as not being someone who's been in Bitcoin for 12 years and is going through command line of Bitcoin script. She is a, I would call a normal person and would want to understand. And she wants to be able to understand has yeah right sorry not to slander your great names in the industry not to slander your great name but as someone who would be able to uh as someone who previously has managed large sums of money at corporations like what would make you feel comfortable and safe on around moving money right uh honestly i think when i look back the thing about miniscript from an underwriting standpoint that really sealed the deal it's it's actually super simple like it

really is just the basic functionality of Miniscript. It allowed really kind of two things that they were particularly interested in. One, distribution of risk. Rob mentioned in a previous answer, but just bringing it back up here. So this idea of getting away from concentration is what allowed us to be able to write a hundred million per customer because they have their own portfolio management, right? The underwriters at these Lloyds syndicates. So they are only willing to place a certain amount of capital as collateral on any given program, on any given location, we'll say. And so the fact that we're able to say, hey, with Miniscript, we actually have a customer holding a unique key. We never have access to it ever, right? That customer generates

their own private keys, and they're a required signer. And so actually, you are not putting all your eggs in the anchor watch basket. You have an anchor watch John basket, and you have an anchor watch Marty basket, and an anchor watch 1031 basket, and so on. And so they're able to say, look, based on how the tech is constructed, each one of these risks is uniquely independent from each other. So a wipeout of one actually doesn't correlate to a wipeout of another in a way that's not even the same at a custodian. Because a custodian could say, well, we have multiple wallets, right? We limit the size of any given wallet. But if you're looking at an inside bad actor who's figured out how to kind of game their own systems, why would that bad actor stop

at wallet one if they figured out how to infiltrate, right? Whereas us, we have each customer having those keys. And that was very, very attractive to them. And second one is actually slipping my mind. But yeah, we do ultimately, we actually, I think our GC coins the term of negative control in terms of how we do this. So this idea of negative control is that AnchorWatch can never unilaterally control the customer's Bitcoin. So, you know, we can prevent bad things from happening by being a required signer. So we can prevent, say, a sophisticated wrench attack to translating to a loss of Bitcoin. So we can kind of influence and mitigate a lot of loss scenarios, but we can never positively control the Bitcoin. And likewise, while the

customer has liability, they're able to actually protect themselves against us, right? So they can say like, well, what if, uh, you know, what if anchor watch, in fact, uh, you know, what if they don't behave as I expect them to, what if, um, you know, what if they're going to abscond with my funds? Well, you have keys, right. And because, uh, a mini script vault can be audited. Uh, if you really wanted to, you could have the vault construction audited by, by a third party before you ever put Bitcoin in it. And that third party could look at it and say, yes, this vault will work exactly how Anchor Watch is telling you it will work. When they say they can't unilaterally spend the Bitcoin, we can look at this vault on chain and we can confirm they can't unilaterally

spend the Bitcoin, right? And then so the tech itself is providing a lot of protection. And then the insurance still comes in to add that additional peace of mind because we specifically cover fraud if we're part of that fraud. So we don't cover a customer committing insurance fraud, right? Like that doesn't work. So if a customer is going to try to fake a theft, fake a loss, obviously we're going to do an investigation that's not going to be covered. But if during that investigation, Lloyd's were to figure out that the loss occurred because Anchor Watch actually colluded with that customer to fake the loss, right? Or we use the tech in a way to do that, then that is a covered loss. And that's why having that Lloyds of London name behind us

is so, so important, especially to an institutional customer, maybe who doesn't already have the relationship with Rob and myself that maybe a lot of Bitcoiners do. They actually want that guarantee from, from Lloyd's to say, look, you know, we can trust anchor watch, uh, they're experts in the technology. And even if something squishy happens, it's covered by Lloyd's. I mean, I think I love that description from, from, from both sides of it, from both of you, because I think it really highlights and illustrates very well. Our thesis or part of our thesis at 1031, which is that Rob, to your point, there's kind of this very powerful, these very powerful cryptography primitives that exist kind of on Bitcoin natively.

And then that's on one side. On the other side, you've got pools of institutional capital and family office capital, high net worth capital in the hundreds of trillions of dollars that want to be able to in some way leverage those properties. But then for much of Bitcoin's history, there's been kind of just a gap that has needed a bridge. And I think you guys are a great example of how that gap, you know, one of the many ways that that gap can get bridged in this context, right? You know, providing both applications and very smooth UX on top of to wrap around the primitives that Bitcoin can accomplish on chain, and then also bridging that to legal structures that traditional pools of capital are not only used to, but actually, you know,

require right in a lot in a lot of cases um and so i think that's you guys are a great example of that i think we're going to see a lot more of that kind of playing out in the future um rob it looks like you wanted to say something so i'll i appreciate it yeah i i agree because i think beck and i really were skating to the puck two and a half years ago when we started like a lot of people's eyes would glaze over when they'd hear insurance right and i can understand i understand why personally i get really excited and worked up about it but like i get why people are like this is boring and weird uh it's just if you're a fiduciary we have this concept of fiduciary flight right like ultimately you're gonna get to a point when you're paying some custodial service

to manage your bitcoin position whoever that is whether it's a wrapper via an etf via dilution holding micro strategy shares whether it's paying a traditional custodian but you're paying someone somewhere to manage the service and ultimately you want to know that you have a certain amount of Bitcoin and you are covered against many different thefts and like many different circumstances of how loss can occur. And I just wanted to kind of call out too about the other applications in this native like contracting power in Bitcoin. It may have taken two and a half years from the initial inception of the idea to where we are sitting today. The incremental products and ways we can wrap and leverage not just the insurance,

but the technology is not that long. We've built our product to be very modular in the sense that we can take different financial contract arrangements and we can kind of click that into the Trident Vault engine and the rest of it all works pretty quickly in short order, right? So we think about lots of ways of doing different insurance wrappers and different ways of doing custody, different ways of doing other financial products. We think that one of the big unlocks we had was kind of tying these traditional financial contracts into Bitcoin native smart contracts. And I think we now have a strong enough toolkit and our own portfolio of internal technology to be able to build this where we can kind of keep on skating to where we think the puck

is going and really be pushing the um pushing the overton window out of like what can be done in bitcoin today and it's something that we view as very much as something that not only keeps us excited and engaged thinking about the art of what's possible but we think it's a really powerful differentiator and why someone may not have done this previously because all of these other custodians tend to use multi-party computing which is aggregating because they want to have the same tech stack for solana and cardano and dogecoin like and everything else whereas by specifically focusing on bitcoin we were able to unlock uh and focus on these deepening in depth and uh and breadth of security that only working with specifically bitcoin would be able to unlock for

us well let's dive into this a little further particularly the smart contracting because that's been a large misnomer uh in the market for for many years now the the idea that bitcoin doesn't have smart contracts. We need to use Ethereum. We need to use Solana. Bitcoin smart contracting just simply isn't robust enough. And I think it's important to highlight that, number one, Bitcoin does and has had smart contracting for quite some time. But the way it's implemented comes with tradeoffs that are very intentional to make sure that you have security at the end of the day. And Rob, you can speak more to that. Yeah. And the limited constraints and how Bitcoin smart contracting works is a security feature.

If you can't have infinite arbitrary computation, you immediately know there's certain ways this is going to work. And you have a very, it's like, I almost describe it as bowling with bumpers, like leveraging manuscript is bowling with bumpers in the sense that I get to do all these really cool things, but I'll never throw a gutter ball, right? Assuming I kind of go through the process correctly. This is where in kind of the larger toolkit, there's a general observation of a lot of these larger smart contracts,

typically just insert an oracle somewhere to do the magic of the decentralization part so immediately once you have an oracle in there it's all subject to an oracle and it kind of starts maybe falling apart a bit uh for like for what we can do today in bitcoin like what we are having a lot of fun leveraging and these are all kind of incumbent metrics can all be used together you have signatures multi-signatures right that everyone uses and is maybe familiar with today that you have a secret key that can move bitcoin funds or maybe a threshold a two of three or three of five. You're able to do things like time locks, as we mentioned earlier. Now, I did not mention this earlier, actually. The time locks we are using are actually embedded with the calendar

time. So if your policy, let's say, expires on January 1st, on January 15th, the funds unlock. It's actually anchored to that. And that's just a very cool property many people aren't leveraging in Bitcoin, is that Bitcoin supports time locks actually tied into the clock time. And then when you think about it, it's because the miners, the only bit of external data that exists in Bitcoin is the timestamp the miners put in the block header, which we need to do the difficulty adjustment. And so you actually can enforce Bitcoin consensus on this difficulty adjustment algorithm. Every single miner is putting in a timestamp in there. And the Bitcoin network has actually a very tight band. The drift is in the order of minutes. It's not that far off.

So you know if you set a time lock for January 15th, 2025, it will unlock January 15th, 2025, right? And you can even go down to the second. Additionally, you're able to do hash locks. This is part of how Lightning works with Ash Timelock contracts. Basically, you have a secret, what's called a preimage, and when you reveal that, you can unlock different spending conditions. You're also able to do things like discrete log contracts, DLCs. That's not something we're personally using today at AnchorWatch, but it allows you to actually have multiple contingent payouts

that are using adapter signatures, and you can kind of settle many different possible outcomes of how something may want to get resolved. And you're also able to use if-else statements. So you're able to have ANDs and ORs and conditionals. These are all things that they're very, very small, very boring, like little Lego bricks, but you can combine them and build what I feel we have at Anchor Watch is like digital Fort Knox, right?

A level of security that really hasn't been seen before. And that's just our application of how we're leveraging this stuff. I think there's a very wide open universe as I think as the Bitcoin developer ecosystem starts to catch up to the full opportunity that's there, there's a wide open ecosystem for different ways that you can leverage what we have today in Bitcoin. to do these more compelling use cases yeah it's funny i mean go ahead john no no you go ahead i was gonna say it's funny miniscript was sitting there uh just having watched you build this it got to the point where you had to go to andrew polster and be like andrew look what i built with your

thing and he's like what the the funniest part of that was i emailed andrew polstra when i was like hey uh because when we started anchor watch initially miniscript was not part of it we were actually uh had a different idea it was still insured custody but it was much smaller stakes self-custody and uh we realized that we wanted to build a big scaling business that we would want to try and find to rewrite it and i told andrew i shot him an email i was like hey i'm thinking about using miniscript at my company do you have any critiques and he said well the problem is none of the hardware wallets support it and i was like well ledger just added it last month he's like oh no one told me and at that moment i went and bought miniscript.com the domain and then i

immediately started talking about it non-stop and talking about like this is an amazing right now today i actually redirected to the official miniscript website that sipa built uh but ultimately for me i view that as an amazing opportunity of i've been in bitcoin for so long i just assumed that all of the everything was done the way it was because it was the best way of doing it and it just took me walking down that path in the unknown forest myself to realize oh there's a lot of treasure chests if you start looking around here right and i'm really excited to hear that other people are starting to build and do this stuff and i think it's great yeah Well, even though, you know, you breeze past the fact that the original concept for Anchor Watch was different, but it is the transition.

It is walking that path that brought us to Miniscript. So when Anchor Watch started, when we brought in our angel checks and we both oriented our lives to start building this thing, that's what we were trying to do. We were thinking as Bitcoiners and we were trying to bring retail self-custody insurance to market. That was the plan, right? So if you have a multi-sig, Rob very quickly figured out how and then to do attestations and built an MVP like in record time that enabled us to do that. We then started taking that out to the reinsurance market and saying, OK, traditional insurance, you know, this is what Bitcoin is. People hold their Bitcoin on these on these hardware wallets. See here, see what it is. And we want to insure it. And people are really good at holding holding on to their Bitcoin. But, you know, it's not without risk. And and they were like, hmm, interesting, intellectually interesting. But we're not going to put our capital behind that. Like there's too many risks, risks of loss, risks of customers committing insurance fraud.

We're just not interested. And so we really had to go back to the drawing board and figure out how to get, you know, big insurance interested in this. And so, you know, the first pivot was really just bigger. okay we have to entice big insurance to get interested in bigger in bitcoin with bigger policies uh how do we get bigger policies okay we need to like sure we want to support retail we are retail we'd love this product to exist but we also need to entice commercial all right how are we going to entice commercial uh you know way bigger policies and how are we going to convince commercial to store the bitcoin in such a way that it's insurable meaning that we can

then go back to Lloyd's and convince them, hey, commercial is holding their Bitcoin in a way that's so safe that you should now be willing to underwrite these massive policies. And so, you know, Rob started, you know, I don't remember, I don't remember the exact day by day, but there was a point that Rob was like, all right, I'm, I'm going to figure out how to do custom scripts. And, and so he started, you know, like, uh, not being a normie. He went, he went down his uh his autist rabbit hole uh and started figuring out custom scripts so he was exploring different things and then our friend uh i think we were talking about maybe on clubhouse or and uh our friend vick was like rob like what you're describing sounds a lot like miniscript

why don't you just use miniscript like and and rob who's been around forever and ever if i remember correctly you weren't even right like even it wasn't like oh yeah miniscript like nothing like nothing uh and so that's actually how we came to miniscript so it was like first we needed to get big to even pull in traditional insurance and then once we were big we needed something secure enough to convince them to write the check uh and so yeah and so how many times did We get on calls with insurance companies holding up hardware devices and explaining to them how it all worked. We would have our whole pitch down.

And ultimately, I think really a testament to what we built is that all of this complexity is abstracted away. You log in, you have a really clean user interface, you interact with your hardware wallet to do the initial setup, and if you have to sign, it all works. And it's very clean. And it feels very powerful to be able to have this. And all of the complexity of all of the details I've been talking about,

it doesn't matter it just works right we handle all of the complexity and we're able to give you a very clean user interface and that just i mean talking about like you know two and a half years we've been building this company a lot of um resilience on our own side and i have to give a huge shout out to becca and kind of channeling through and getting through all of this to not keep knocking down the milestones aiming higher realizing that there are these opportunities that are sitting there for the taking and we're just really excited to be going into a launch going into this bull market and we get to kind of start seeing the fruits of our labor start being seen by the wild?

Rob, the UX is kind of interesting in its own right, because, you know, we are really, really proud of the UX and we have abstracted it away. But early on, I mean, we spent a couple of months really kind of trying to decide how we were going to present Miniscript to a customer. Like, how do we abstract it away? Because this is tech and functionality that Bitcoiners haven't been exposed to and therefore is not built into wallets out there that they were using. And so, you know, we were having to decide, like, how do we talk about time locks? OK, we've built a vault that has, you know, four different time locks. What do we even call these? Like, how do we deal with it that people all think that a time

locks, the perception of time locks is that your money, your Bitcoin is locked until X. But that's not what a time lock actually means, right? What a time lock actually means is that after a certain amount of time has passed, an additional spending condition becomes available, but the prior one is still available, right? So like, how do we do this? What words do we use? What do we put on screen? and yeah, we are really, really proud of what we've come up with and we're super excited to get customers in because we think what we've presented

is something that is easy, that's not intimidating, that doesn't expect customers to understand Bitcoin script. They might be interested in it and if they want to, we'd love to chat about it with them, but they don't have to.

They don't need to understand any of this. You can go look at Menpool Space after you hit broadcast, you can go look at it yourself and you can see the whole script stack. And that's a fun thing I'd like to do for people who want to know that, but you don't need to know it. So there was a lot of work in the design space that I think is groundbreaking. And if we did it right, we'll not get discussed that much. And maybe decisions that we've made will be the new standard in these things because we present them in a way that we hope will just make sense. Well, I love that the focus point there of to the point of making it just work the solution for that, I feel like in not so much Bitcoin, but certainly broader crypto in the last five, 10 years has been, you know, to make it just work.

you basically you're taking significant shortcuts, right? You're taking custody entirely out of customers hands. You're riding on somebody else's licenses. You are doing the lean startup thing and taking the absolute path of least resistance to just get a product into someone's hands. That is the lowest friction possible. You guys have really done the hard work of getting all of the work under the hood, right?

Making it robust, making it resilient, making it native to Bitcoin and also getting, you know, Lloyd's cover holder status, actually doing that, doing that work yourselves and then packaging that all up and presenting it so that now you have something that just works, but it doesn't just work because it's kind of got 14 compromises under the hood and it's, you know, relying on 18 different kind of points of failure, none of which you really have control over from different counterparties. It, it, it both just works and it also actually just works under the hood. Right. And a lot of different kind of adversarial situations. Absolutely. Yeah. I think that's, um, as a thought, like I really was not

looking to build a big advanced like tech platform like basically what we've built as a coordinator because what that means is like um john if you're a customer marty your customer you log in and you sign john you can send a request to marty and marty will get an email and then he can log into his dashboard and get the prompt like oh john's already signed this here's the transaction do you want to sign it we're like running air traffic control under the hood to be able to route all this information and we had to put a lot of time into how we architect our system to be able to do that i was very much trying to keep it as simple and lean as to start to do this but we took this challenge as really an opportunity to use that cliche to be able to forge the path not just on

the ux but executing on the tech stack we built it ourselves we're not leasing out someone else's tech we think is a really important differentiator we are in control of our own product roadmap and destiny now to be able to do this in a thousand different ways and we're really you know we think that as a really important differentiator for us and if anyone's ever followed me on twitter i'm banging the drum and trying to get other people to come along and i've been talking about it for well over a year and a half now. And I'm still surprised that people haven't done it yet. Maybe once we're live in market and they're seeing that this stuff is all working and it's secure, we'll get more people coming. And I just think ultimately that accrues value to the Bitcoin

network, that accrues value to people who are holding Bitcoin. There are more financial contracts and wrappers and ways that you can leverage Bitcoin natively today. And I think that just helps accrete more value to the overall ecosystem. Well, let's build on that because what What does this product existing open up in terms of the pools of capital, like off the bat over the next 12 months? What are your highest target list of clients looking like? And what do you think you've enabled and gives you comfortability to go after a particular client that is now willing to get into Bitcoin?

Yeah, I mean, I think our aspirations are high, right? So we worked really, really hard to get the 100 million writing ability. That's a lot of Bitcoin able to be underwritten for any given customer. And therefore, we are hoping to attract customers who are taking advantage of large policies. But with that, we think that the product existing does actually encourage, you know, entities with that sort of capital to be willing to hold the amount of Bitcoin. So now, again, for the first time, you can make a massive allocation to Bitcoin in dollar terms, right? Tens of millions of dollars. And it can be held in a way that you're not, you know, anybody who buys Bitcoin is exposed to the price volatility.

So there's price risk just by making the bet, right? And so up till now, anybody, large or small, but let's look at a multifamily office or similar, they were saying like, look, we're already taking on this price risk. Do we want to take on counterparty risk as well? The news is telling me to be very concerned, right? Like the headlines are telling me there are big red flags here. And in addition to the price risk, is this where, you know, if our job is, say, a family office or a multifamily office is to preserve the family's capital, is this risk one that we should take? And so we think just, you know, by existing, we think we provide a viable alternative to not making an allocation at all.

So now they can be limited for the most part to only the price risk. And they can feel confident that the technology is in place and the hundreds of year old Lloyds of London underwriting insurance is in place to give you confidence to make that investment. So we think it actually does encourage new allocation into Bitcoin that maybe wasn't there previously. And, you know, we're trying to enable that. That's one of our goals. It's the equivalent of like if you were to hold a large spot gold, like if you were holding the physical gold, that you would want to have that insured somewhere, right? You want to understand that it's safe. And I think that's very much where the Bitcoin thesis kind of lines up as well. For a lot of investment mandates for funds, traditional funds, if you're holding these kind of things, you want to be able to do that.

there's bankruptcy courts that often will require that the underlying assets in the estate being managed need to be insured unless there is no insurance market that exists today, right? The introduction of us into the market now kind of changes the fiduciary obligation of, is this even an option? And up to this point, the answer has been no. And since the answer has been no, they've been able to get exemptions and kind of get past that. We believe that just ultimately this mitigation of risk transfer which is ultimately what insurance is is the way it does not make risk disappear but the idea of being able to transfer risk is just very foundational for financial markets and so players um you know being able to go after those larger players that want to

be able to have that counterparty risk transferred to someone else like is a really meaningful like differentiator for them i think that decision making happens at the retail level too you know that same decision of like, is this getting away from me? You know, if, if you are in a situation where you're saving for your family and it went from being 10% of your net worth to 96% of your net worth. And, you know, now you are seriously thinking about, about the risks and the implications of having an uninsured bearer asset. You know, the gold analogy was great. You know, if you have a few gold coins,

you might be willing to self-insure those, meaning not have an outside insurer taking on any of the risk. You might be willing to hold those in your personal safe, et cetera. But if you have enough physical gold that that simply doesn't make sense, it doesn't make sense

to have that stored in your house and the only alternative was an uninsured custodian so you bring it to a vault company and you say hey hold hold my entire family's future for me and they're like sure we will uh here's how much we charge and we're like great and what happens if you mess up they're like oh that's you know nothing like we just disappear and and and you have no and you have no right to the fact that we messed up and your gold is just gone forever. And then you're like, so what am I paying you for exactly? Right. So if there's, what is custody without some sort of guarantee, right? Like the insurance actually is, is just a foregone conclusion. And when you think about, or it should be, uh, that's our thesis anyway, when you think about custody services,

Like, OK, but what if you mess up? The answer needs to be you're taken care of. That's the service we're providing you. We're providing you with that guarantee. Right. And so, yeah, I mean, I think that the gold analogy works great. And again, I think the existence of our product, you know, provides that viable alternative. And it really is this, from our point of view, really happy medium between self-custody and a custodian enabled by Miniscript. So you get that negative control that we described of self-custody. You get to be a keyholder that prevents the custodian or anchor watch from doing wrong. But you get a professional, insured, responsible organization to come in and also provide protection and services and those kind of things that create a lot of a lot of comfort that realistically most people are looking for once they're they're talking about large sums.

Well, it's a real like, you know, to use the overused phrase, it's a real belt and suspenders approach. Right. Which when you're talking about sums like we're talking about here up to one hundred million dollars, like that's kind of no protection is too much, especially in an institutional context or kind of a multigenerational family context. Right. And so I, you know, to that point, to drill into that a little further, you guys have both alluded to it a little bit here. But, you know, this one to one coverage of amounts of this of this magnitude had existed before that created loopholes that created, you know, exemptions. Now that it does exist. Curious how you guys think that what implications that has for kind of fiduciaries worldwide who, you know, are cussing Bitcoin or interacting with Bitcoin. What does the next five years look like if you're a fiduciary who, you know, has is responsible for Bitcoin and how quickly could we maybe see, you know, incremental kind of adoption of things like like Trident and what Anchor Watch is doing? Yeah. Rob mentioned the phrase fiduciary flight, and we expect that paying a SAS fee to custody where there's no guarantee or paying an insurance premium where there is one. If you're a fiduciary choosing between custody services, you know, to me, the choice becomes very evident.

And we think as we prove ourselves in the marketplace, we think that movement will be very quick. Globally, there's there's a move by regulators that will push people in this direction anyway. You know, I believe I believe at the first of the year in the EU, there's the MICA regulations. Other countries have similar UAE has has regulations in place that say more or less insurance is required. If you're a crypto service provider, if there is insurance available and is economically viable. So they could get away with being uninsured if there just wasn't insurance at all, or if the only insurance on the marketplace was priced such that they could make the case that it just does not make sense for them to offer it for their customers or to procure it for themselves. And, you know, that's certainly not why we built Anchor Watch, but I think Anchor Watch and what we provide does fill that hole. You know, we are providing high quality insurance in an economically viable way.

And so I expect there will be kind of self-motivated fiduciary flight and probably within a few years, some pushes in fiduciary flight as well. I would also just call it it's a two sided market, right? You have the fiduciaries that are looking for the insurance and then you have the capacity side. right and as of today there's maybe three four maybe five billion dollars of total crypto cover that exists in the marketplace and it's very much as we discussed why earlier because all the risks are at maybe like 10 companies right and at the end of the day um even if you know the whole market you know 10x is every four or five years uh there's there's still the same 10 players and so our model and how we've kind of gone about this risk distribution is how you make this more akin

to a property policy. Additionally, just as insurance works, the risk that we have is entirely uncorrelated to everything else, right? Like if you're an insurer maybe in Florida or in the Southeast and hurricanes keep coming, that doesn't impact us if we're part of your property and specie cover, right? That's an important detail. This is a property specie cover of the actual policy, like of what we're doing. And we're in that bucket of risk. And the fact that we can bring an uncorrelated risk to the table that is a meaningful differentiating for risk for the insurers. And I think over time, as the market matures, you'll see more success. You'll be able to kind of back test and do additional actuarial studies and be able to have this advantage of

seeing the product live in market. It will open up markets to go chase after this as well. And then you're going to have this really great, beautiful flywheel of more insurance getting more comfortable with this. So being able to open up their capacity more, and then you're going to have more people who are going to be wanting to buy it, and you're going to be able to get even more risk distribution as more people sign up for it. And it gets really, really virtuous for being able to make this to a point where it'll get to a point where it'll be an obvious thing. Some of our people we've talked to have said that insurance in this sense, it's almost like the new instantiation of banking, right? You have FDIC today with US dollar bank accounts, which is backstopped by the government.

This is almost a private market solution to be able to provide this as Bitcoin as your money, being able to provide the insurance is the important part of a banker and making sure that the money is going to be there when you need it. And so flipping the custodian model, it's almost like a banking model. And so we think this is just very natural in how it's going to progress. It'll take different forms, different wrappers,

but ultimately transferring of risk if someone's managing your property for you is just table stakes in how everything else is done. If you go out and buy a mortgage on your house, the bank is now owning the house. They're going to require you have an insurance policy on it before you can close the mortgage, right? These are all very foundational things

that banks want to be able to take the risk of maybe you individually not being able to pay back your loan, but they also don't want to underwrite the risk of what happens if the house catches on fire, right? And that's what we're doing here. And by being able to price that risk and being able to transfer that risk to someone else is going to be able to allow more players to enter the market. And I think it's going to be a very exciting next couple of years seeing this thesis play out. One of the, just to pick up on that a little bit, one of the things that I remember you and I talked about last year when we were kind of, you know, evaluating and ultimately made our, you know,

our lead investment in the seed round was this idea of, you know, being covered under kind of property specie policies, but having massively more kind of like titratable and composable risk profiles to what's being insured relative to, you know, if you've got, you know, a set of property policies on real estate in Florida, the actuarial tables will tell you like there's some probability every year that there's going to be like this loss event. Or if you have, you know, health insurance or life insurance. Like, yeah, you can kind of incentivize people to, you know, to not smoke and to go to the gym and different things that kind of, you know, tweak the risk profile. But it's, you know, your control over that's still pretty limited. And with by contrast

with, you know, Bitcoin and Miniscript, you guys can provide such tight controls and so many kind of additional fail safes on on the asset itself and kind of to avoid that catastrophic scenario in the first place and probably kind of tighter and tighter and better and better controls over time as you know policies can get more composable and you guys maybe go a little further out on just like the innovation curve of what's possible with with the policies um this uh just when you think about just how the underlying risk of on top of that asset compares to for a property policy compares to ensuring you know traditional property traditional physical assets that are in one place at one time they have some binary risk of like yes a hurricane came and blew it down or no it didn't

The the outcome, the distribution of outcomes that I think that you guys can provide on that same policy is should be, I would imagine, very compelling over time to capacity providers who have to weigh insuring Bitcoin relative to insuring other types of property. That was a huge unlock for us when we were evaluating the investment. So, um, very bullish on that. I mean, we'll, we'll give you a huge amount of credit, uh, for leading, leading our investment and we're super appreciative of that. And it obviously made, made a huge, uh, difference for us and, and you guys diving in to that aspect and really understanding it from the get go, uh, and making that investment during, during the bear market, uh, when, when everybody was kind of feeling the pinch and backing

us in you anyway, and seeing the bigger vision here and what this can do, you know, not just for Anchor Watch and the success that we expect to have ourselves, but really the difference that we, I think, all believe that insured custody and just Bitcoin native insurance policies can do for the adoption of Bitcoin in the United States and globally. So thank you very much for that investment. You know, everything, everything you said in terms of the risk appetite at Lloyd's, I think is spot on. And, and yeah, just to kind of reiterate the, the, the insurance market is kind of investment banking by a different name, right? So the insurance companies, whether we're talking the syndicates at Lloyd's of London or other traditional insurance, you know, they have

a pool of capital. Regulators say to be insurance, you know, for any particular risk based on how risky it is, they're going to require a certain amount of capital kind of set aside, earmarked to underwrite a given risk. And so every underwriter at these large insurers looks at programs, if you want to call Anchor Watch a program, but they're looking at us and they're analyzing us in a sea of other investment opportunities, because that's what we are to them, right? We are bringing them a risk and we are explaining to them how we see the economics of this risk. And so they're looking at it based on lots of things. How frequently is a loss going to happen? When a loss happens, how severe is that loss going to be? And then yes, property

and within property is specie, you know, what pool of my capital? So just like any other business, they have their Excel spreadsheets, right? And they have certain allocations and they've said, look, our company, we're comfortable, you know, we like to have 25% of our capital on in property and 75% in life. And that's just our particular risk appetite. And another company is like, oh, we're flipped. We like 75% property and 25% life. And then within property, you can break it down to the different subsections of property. And so you've mentioned specie a couple of times. What specie actually is, think of it as the small weird stuff within property. So think jewelry, think fine art, things like that, but like things, right? And so specie itself is generally a fairly

small subset, but it's still in that property pool. So then when they're looking at their own asset allocation, they're looking at it based on profitability and other things, but they're also looking at it based on risk of loss. And so because property is so impacted, especially for the last five to seven years by hurricanes and wildfires, this is a major impact in that industry. And homeowners in California and Florida know this very well, right? So the trends that are happening in property insurance are impacting insurers greatly. So we can come in and we can say, hey, Lloyd Syndicates, hey, insurers, we have this program that we want to present to you. And it is property, but it's totally uncorrelated to all those other

risks right and so now if you kind of zoom in on this part of their spreadsheet we're a very attractive risk to them because they're like oh interesting so now in this kind of this this dumpster fire of hurricanes uh over the last you know seven years there's this there's this corner of crypto insurance that actually has nothing to do with hurricanes and what a relief because we would love to be able to get some of our money allocated into this industry that doesn't have anything to do with that. And so that's very, very, I think, integral to our ability to get their sign in originally. And one just additional point to add here, definitely for the vision you guys had at 1031 as we started explaining this,

was immediately understanding, okay, so you have a Bitcoin address that's holding funds, And if someone says like, oh, I lost my keys, I lost whatever, we're looking at the asset on chain. We can see it right there on the Bitcoin ledger. And you guys understanding how Bitcoin works, we're able to quickly discern, okay, we're able to understand, okay, if the address is still sitting there, there actually hasn't been a loss yet. We can do the recovery of these things. And I made it the equivocation of if you were a car insurer and in real time, you got to see the status of all the cars that you're insuring on the road. That's what we have with the Bitcoin UTXO set. We can look at it right there, right? And that's just a really meaningful differentiator

when it comes to understanding the risk, being able to understand, improve losses that happen, where maybe it's more ambiguous with physical property in the traditional sense. What we have is not only this distribution of risk of many private keys and many rules on how the funds move from there, but the actual ledger credit itself is sitting right there in an objective form that everyone can look at it whenever they want. And this takes it in a little bit of a different direction. But because of that, we think it actually makes for a higher quality insurance product to those capital allocators as well, because we can say, look, if the loss happens, because we

have eyes on those UTXOs, let's say a wrench attack happened and the Bitcoin moved and the thieves took it. We pay out our customers. We do our investigation. It appears the wrench attack was legitimate. We take care of our customers. We are now hunting down those UTXOs. So there's this concept called subrogation that ultimately, uh, the customer authorizes us to, um, more or less go after and, uh, pursue those assets and they become the property of the insurance company. So, uh, when you're, uh, you know, watching movies and an insurance company hires a private investigator to hunt down the stolen piece of art, it's because the insurance company at that point owns the piece of art. It's their art. That's their asset that is still on their books.

And if they can hire a PI and they can hunt it down, they can recover some of their losses, even though the customer had already been taken care of. So one, that's very attractive, right? Because Bitcoin is a transparent public ledger. We will be able to hunt down those UTXOs. And we're an insurance company, right? We're going to be around until the anchor watch name is on buildings. That's our intention. So we're very patient, right? We will hunt those UTXOs forever. Two, we think that benefits our customers, right? Because if you knew that, if you're a sophisticated thief and you can target customer A who's uninsured or customer B with Becca, who's going to hunt you down forever, like who do you choose? You choose the uninsured

customer, right? Who's not affiliated with a company, who's intrinsically motivated to hunt you forever, not for a year, forever, because they're our UTXOs, right? So we actually think that as our name gets out there, as customers get more comfortable with us, actually just being an anchor watch customer actually reduces your risks. It acts as a deterrent for you to be targeted because the repercussions are so severe yeah instead of instead of this house is protected by whatever security it's like that our bitcoins exactly by anchor watch you just put it that's right that's right and and you know the the last thing just to call out there in that example is we cover wrench attacks um you know we had to fight long and hard

on behalf of Bitcoiners to be able to cover that risk. It's a real risk, right? It seems like every few weeks, every month, you hear about another attack. And we have this belts and suspenders approach. And I think you guys teased me last time I started talking about kidnapping risks for being a little intense. But you think about these situations and a sophisticated wrench attack is just that. Somebody comes up to you with a wrench in the form of a gun and puts it to your head. And are you really going to not give over your passphrase? Are you really not going to tell them where the wallet is, even if it's across state lines? Or do you say, I value my life or my family's life more than I value those UTXOs and you can have them. And so ultimately, to be

able to protect Bitcoiners in that way, to say like, look, even then, even then you have a backstop, the risk of ruin is not complete, right? It's very, very powerful. And honestly, for me, just in terms of where my time and effort went into over the last, say, 18 months, it was to provide this protection to Bitcoin owners because every kind of custody piece of cleverness that people come up to, it can be circumvented with a threat of death, right? Even holding no keys can be circumvented with a threat of death. You can say, look, I don't want that risk. I don't want my family put at that risk. So I'm going to give my money to a custodian. I'm going to put my Bitcoin at a custodian. I'm not going to hold keys at all. Still common

put a gun to your head and they say, no, call that custodian and tell them to move the Bitcoin. Here's the address. Do you do it? Yes, you do. Right. So so the tech itself, this is one place where it's actually not belt and suspenders. It is because I think that the tech is a deterrent. But at the end of the day, it is the insurance that is providing that guarantee to that very real risk. And, you know, I'm I'm really, really proud of it because I think it really changes the risk reward aspect of being a Bitcoin owner. Well, thank you for fighting that fight. It's a very important one.

I'm very gracious, not gracious, very thankful that you've done this. And before we wrap up, though, like flipping it in the conversation on its head, like you guys are providing an insurance product for Bitcoiners. And as you describe the relative risk that exists for your insurance product compared to other products that are insured is i think we would all argue part of the investment thesis is relatively low risk and should be very appealing for underwriters of insurance policies but we had a headline in the

news last week with the lions uh the insurance company out of germany participating in the micro strategy convertible note i believe they took up 25 of that individual offering um and And this is like flipping on the head because we've been talking about an application of insurance for Bitcoiners. In your mind, what could Bitcoin do for the insurance industry, the counterparts? This goes to Becca's point about insurance being investment banking by a different name, right? They have a certain pool of assets. And if you are taking in premium, you're managing the premium. You have to pay out a certain amount of claims.

And insurance is a multi-trillion dollar market when it comes to the fixed income market, the bond market, right? It dwarfs the amount of their allocation as mostly fixed income because they're trying to understand, I have this pile of money, I'm going to have a certain amount of claims. Fixed income is the perfect vehicle to know I can take this coupon and I can cover my overhead and my expenses and I can grow my balance sheet accretively. This is a really interesting artifact. You can go all the way back to FDR and the Great New Deal. basically there was an attempt to try and make uh insurance a nationally regulated thing and it was

like the one part that fdr couldn't touch the states that did a big like heisman stiff arm on them and so insurance today in the united states is actually regulated at the state level so every single state has an insurance commissioner and they're the head regulator when it comes to insurance for that state now there is a self-regulatory body that comes together called the national association of insurance commissioners and it's the heads of each state plus dc puerto Rico and a couple other territories. And they all come together on, to Becca mentioned earlier, you have a certain amount of capital. Well, what's that capital worth for the sake of your balance sheet? You won't be surprised to hear this. If you're holding US debt, that's top tier. If you're

holding US government debt, that is the most respected capital if you are an insurance company. And you have a kind of a sliding scale downwards to when you get to the bottom, what's called an unadmitted asset. So if an insurance company today buys Bitcoin, they have to basically mark that down, not with the sense, like they have the money, it's on the balance sheet in that sense, but for their reserve capital ratio, they can't get any credit towards that. Now enter microstrategy in these convertible bonds. You now have a fixed income instrument for a publicly traded company that would take a discounting instead of it being worth zero, you're still able to get leverage because maybe it's 50 cents on the dollar. And you get the Bitcoin upside when you cash it out,

right? So it provides, and you have the downside protection with microstrategy since even at a 0% coupon, assuming that MicroStrategy is around, then you will be able to get your coupon back at no loss, just being able to get your cash out at 0%, get your original amount you put in. But then also, if it converts, you now have this appreciable upside. So there have been a couple insurance companies. The Allianz one last week was the really big one that was catching a lot of headlines because it started having people understand there are other capital markets that don't think

the way that we do as individual Bitcoiners that have their own mandates and their own compliance overhead and regulatory oversights and how they can kind of manage their large portfolios and that this MicroStrategy bond was a great way to do it. Whereas you would say, well, why don't you just hold your own keys? Like, why don't you just buy Bitcoin? And it just doesn't work for their infrastructure. It just doesn't work regulatory wise. The fixed income desks at the insurance companies are the largest buyers and sellers.

You know, they may hold some stocks, but it's definitely fixed income at a very large rate, the majority of their portfolio. and this is where it gets very interesting just understanding that where if they had bought Bitcoin they're just taking that right off and I know MetLife a couple years ago bought a hundred million dollars they're doing long-dated policies they're a very big company they can take that haircut and they're still gonna be right one day they're gonna sell that Bitcoin and they're gonna be able to put it into treasuries or something and they'll be able to re-recognize the revenue but it's actually totally unrelated to FASB everyone thinks FASB is kind of the end-all

be-all and it is for accounting but insurance has its own special accounting because it has a different structure and how it has to navigate its balance sheet vis-a-vis other businesses. So that was a really big unlock for people to see. That's why people are buying this micro-strategy convertible bond, because they're able to now get Bitcoin upside in their fixed income portfolio in a way that had never been addressable or wrapped in a security before. And I think the only thing I would add on at all is that, you know, AnchorWatch, I think, will continue to advocate for Bitcoin itself, native Bitcoin, to become an admitted asset for all the exact same reasons, that they shouldn't be impaired and be able to take

investment in Bitcoin itself. Trillions of dollars of capital to come in. Absolutely. I mean, I think to loop it back to the conversation we had a few minutes ago, So whether it's, you know, a pool of capital wanting to get Bitcoin exposure in this way that Allianz has, you know, that satisfies kind of reserve requirements and regulatory requirements, whether it's that or, Becca, to your point, you know, Lloyd's looking at the risk return profile that you guys provide in what you're doing. That's its own kind of like operational Bitcoin leverage in some ways, right? It's getting exposure to the growth of Bitcoin's adoption in a different way. And I think that's that's one thing that, you know, people broadly, the market still has like, you know, very early on in understanding is that all this capital out there, it's going to get leveraged to Bitcoin in some way. But a lot of it's not going to just liquidate and go market by Bitcoin. It's going to reallocate in such a way that it gets exposure to Bitcoin derivatives or Bitcoin customers or whatever the case may be.

You see that with Lloyd's and you see that with Allianz. And I think that, you know, we're at the very early stages of that trend, just, you know, really accelerating. To that point, John, I mean, we've been talking about it a lot this year, particularly as Bitcoin begins to Bitcoinize traditional financial markets. What is really going to be an impetus for a massive tipping point in the future is undeniable track records, whether that's credit funds allocated into Bitcoin back lending, like the funds that are allocated to Unchain down the hall. We talk about a 1031 as a venture fund, building a track record of investing in companies like Anchor Watch and providing returns to investors. We're still at the early innings of proving that track record out. And then similarly within Lloyd's, I could easily see a scenario five years down the

line where they're looking at all these different programs. They're like, look at this Anchor Watch program. Look at the track record on what's happened here in terms of the amount of insurance they've been able to provide uh and the amount of premium they've been able to bring in and the amount of loss is actually manifested over time like they're gonna i imagine part of our thesis they're gonna look at that be like holy crap there's something here that we need to dig deeper into and adopt like is is this what anchor watch is doing specifically is it a combination of what anchor watch is doing and bitcoin the asset and i think once you get these track records out there that's

when you get the tipping point where it's undeniable for everybody. Yeah. I mean, I think it's fun to be at the, at the start of the flywheel, right. Uh, cause that's where I think we are. And so I think our part initially is that generating premium part and built on our tech providing low loss rates. So I think, you know, very quickly, you know, every single year that we're, uh, kind of renegotiating and coming back to Lloyd's and be able to say, like, look at the demand for this product. And in fact, look at what the tech delivered, look how safe it is. Um, you know, maybe, maybe currently, I don't know the exact number, but, you know, maybe, um, species currently this slice, right? Maybe that gets, maybe that, that actually size of

the piece of pie expands because that we proved to be, uh, you know, a great, a great provider of premiums because we're, we're bringing a really high quality product to market that people, you know, show that they want. And then the other side of that, that wheel, uh, then is the kind of capital market side. So everything that Rob was discussing as that unlocks, um, and, and they can really kind of double dip into this industry. And all of this is going to be, uh, enhanced by the market cap of Bitcoin. So, you know, as, as we're wherever we are, I don't, I don't even know, a trillion sevens, like somewhere in that neighborhood, you know, when that turns into three and then five and then 10 and then a hundred, uh, you know, the whole game changes, right?

Because Bitcoin doesn't stop being a bearer asset. The need for it to be insured doesn't change just because the market gets larger and larger. So the TAM will get larger. Hopefully the attractiveness of the risk remains very high. And then behind it, it's favorable in terms of regulations as being an admitted asset. And all these things just go together and amplify Bitcoin's place in the financial world. We named this podcast Bitcoin Alpha for a reason. I think that was just some high octane alpha right there.

Again, being here at the beginning of the flywheel is extremely exciting. We're extremely excited and proud to be on this journey with both of you. And it's been a big week for you. So thank you for being our first guest as well. I'm sure you guys are crazy busy right now. Thank you for having us. And thank you for, as Becca said before, leading the investment in our seed round last year. We've come a long way and there's so much

far to go. We're really excited to get into the market and show everyone what we've been building, being able to share it with the world. And just as a quick drop, if anyone's interested, go to inkwatch.com. We have an intake form there and then you can start filling out a couple of details and then we'll get back to you.

Becca, myself, we'll get on a call with you and we can talk in detail for next steps. John, anything you want to add before we wrap up here? I'm bullish. That's all I got. that was your bitcoin alpha for the week see you guys maybe next week who knows we don't know if this bi-weekly or weekly yet we'll see you next time figure it out